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\u201cI never go into a budget cycle expecting to have to dip into reserves,\u201d Precinct 2 Commissioner Justin Rodriguez told the Express-News. \u201cI want this to be the last time we have to do it.”<\/p>\n
Marvin Pfeiffer\/Express-News<\/p>\n
For the second year in a row, Bexar County is dipping into its savings to balance the budget \u2014 a short-term fix that officials and experts warn can’t continue indefinitely.\u00a0<\/p>\n
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\u201cBexar County needs to start making those tough, unpopular decisions now because it\u2019s not going to get any easier kicking the can down the road,\u201d said Bob Bland, a professor of local government at the University of North Texas in Denton.<\/p>\n
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\u201cI often find that the longer a county waits, the fewer options it\u2019ll have,\u201d he added.\u00a0<\/p>\n
The warning comes as the five-member Bexar County Commissioners Court prepares this week to adopt a $2.6 billion budget for fiscal year 2027, which starts Oct. 1.<\/p>\n
Property tax revenue, which pays for about 80% of county government operations, is slipping. Millions in federal pandemic relief funds are running out. And a $145 million deficit will plague the county’s next two budgets.\u00a0<\/p>\n
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Next year’s spending plan doesn’t include a property tax rate hike or service cuts, but it would draw $68 million from the county\u2019s reserves. Experts say that leaves commissioners with fewer options to balance future budgets.<\/p>\n
In other words, tax or fee increases and fewer county services could become all but inevitable.<\/p>\n
Draining reserves<\/p>\n
The reserve fund is intended to be used for one-time fixes, to help the county get through temporary financial emergencies, said Eugenia Gorina, a professor of public and nonprofit management at University of Texas at Dallas. It’s not a solution to budgetary problems that could last years, like a drop-off in property tax revenue.<\/p>\n
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This year, the county has drained $105 million in reserves to balance its budget, leaving $303 million in the fund. Under the proposed budget, there would be about $234 million left at the end of next year.<\/p>\n
According to Bland, this approach is common among local governments \u2014 and they can quickly become hooked.\u00a0<\/p>\n
“I’ve found that once governments dip into their reserves, it’s hard for them to not keep dipping because the local cost is very low,” he added.<\/p>\n
That reliance can have costly consequences.<\/p>\n
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Credit-rating agencies consider Bexar County\u2019s reserves as they’re determining\u00a0its financial strength. A steep or sustained decline in its reserves could put the county’s high AAA bond rating at risk. A ratings cut would result in the county paying higher interest rates on its bonds, making its debt payments\u00a0more expensive.\u00a0<\/p>\n
Bexar County requires its reserves to equal at least 10% of its operating budget, though it aims for a \u201ccushion\u201d of 15%, Budget and Finance Director Tanya Gaitan said.<\/p>\n
Bexar County has a big cushion. The 2027 budget would leave about 32% of the county’s $730 million operating budget in reserves at the end of the year.<\/p>\n
But\u00a0Gorina said the size of the reserve balance is only part of the story. The concern, she said, is that the county is turning to reserves in consecutive years to balance its budget. She said it\u2019s \u201conly a matter of time\u201d before the county\u2019s repeated use of savings puts it at risk of a credit-rating cut.<\/p>\n
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\u201cTrends matter more than levels, and multiple deficits in a row is an indicator of fiscal stress,\u201d\u00a0Gorina added. That is, the concern is the county\u2019s repeated reliance on reserves, not simply how much it has saved.\u00a0<\/p>\n
Gaitan said the county’s reserve fund is big enough to support the county through fiscal year 2030. But Bland cautioned against continuing to spend from its savings.<\/p>\n
“Two successive years of tapping reserves says that they’re not managing their expenditures to stay within their capabilities,” he said. “I’m not saying their bond rating will immediately lower, but it’s certainly going to get the attention of bond-rating firms.”<\/p>\n
Some county commissioners are voicing the same concerns.<\/p>\n
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\u201cI never go into a budget cycle expecting to have to dip into reserves,\u201d Precinct 2 Commissioner Justin Rodriguez told the San Antonio Express-News. \u201cI want this to be the last time we have to do it, but it’s difficult without knowing what\u2019s going to happen to the real estate market.\u201d<\/p>\n
The proposed budget does not include funding for major new capital projects, even through the fast-growing county needs more roads, drainage and other infrastructure. Rodriguez said issuing bonds for flood-control projects and other infrastructure work could help \u201cstop the bleeding\u201d from the reserve fund.<\/p>\n
Inevitable cuts<\/p>\n
There is one area where budget officers say the county will have no choice but to make cuts: pandemic-era initiatives.\u00a0<\/p>\n
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In 2021, Bexar County received $389 million in federal funds through the American Rescue Plan Act, which supported local programs ranging from mental health services to education and youth programming. But the act requires that money to be spent by Dec. 31.<\/p>\n
Funding for all 91\u00a0ARPA\u00a0positions is included in the proposed budget\u2019s contingency accounts, meaning it requires commissioners’ approval, Gaitan said. As Bexar County’s governing body, commissioners court will decide whether to adopt the proposed budget \u2014 and, in turn, whether funding for those positions remains in place. \u00a0<\/p>\n
In a budget workshop earlier this month, budget officers recommended cutting dozens of positions across several ARPA programs, including library programming, domestic violence support and the public health department, and reducing others from full-time to part-time.<\/p>\n
Program leaders spoke at the meeting, pushing the court to continue paying for positions they view as essential. Commissioners court’s four Democrats \u2014 Judge Peter Sakai and Commissioners Rebeca Clay-Flores, Tommy\u00a0Calvert and Rodriguez \u2014\u00a0were sympathetic, saying they wanted to find ways to keep some of\u00a0those employees on the payroll.\u00a0<\/p>\n
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\u201cI\u2019d like to find a way to work with you and the budget to see what we can live with,\u201d Rodriguez told Laura Cole, the director of Bibliotech Navigators, an ARPA program that offers free digital skills training to seniors.<\/p>\n
But Precinct 3 Commissioner Grant Moody, the court\u2019s lone Republican, repeatedly said cuts would be necessary as the county confronts its budget deficit.<\/p>\n
\u201cThose programs that my colleagues want to see continued are going to be funded on the credit card, coming out of reserves, and we need to be very clear and mindful of that,” he told the Express-News.<\/p>\n
Where will the money come from?<\/p>\n
Bland said the county has two choices if it wants to avoid relying on reserves: increase the revenue it brings in or cut, reduce or consolidate services.\u00a0<\/p>\n
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While county government relies heavily on property taxes, state lawmakers have increasingly limited how much tax revenue it can collect.<\/p>\n
In 2019, the Legislature approved a 3.5% cap on annual property-tax growth for counties, requiring voter approval for increases above that threshold. Lawmakers considered lowering<\/a> that threshold to 2.5% last year, but the proposal ultimately failed in the House.<\/p>\n But even without those constraints, Bexar County’s leaders have been loath to touch the property tax rate \u2014 other than to trim it in flush years. Commissioners court hasn’t raised the tax rate in more than 30 years<\/a>, and it won’t this year.<\/p>\n The state has also\u00a0mandated homestead-tax exemptions to reduce the amount of residential property the county can tax. Texas\u00a0provides exemptions<\/a> for disabled veterans, and voters approved an additional exemption for surviving spouses of disabled veterans last November.\u00a0<\/p>\n Article continues below this ad<\/p>\n \u201cThe costs of those exemptions are borne at the local level,\u201d Bland\u00a0said. \u201cThe state leaves it to local governments to figure out how to cover their generosity.\u201d<\/p>\n On top of state exemptions, both Bexar County and the city of San Antonio have adopted 20% homestead-tax<\/a> exemptions for residents.<\/p>\n Gorina said local governments facing budget pressures like Bexar County often look for ways to generate new revenue, including by raising fees, such as those for park pavilion rentals or tourism-related services.<\/p>\n Bexar County expects to collect $43.9 million in fee revenue next year, down from $50.6 million this year. But Bland said increasing fees for services\u00a0 \u2014 including those provided by the military services office and emergency management department \u2014 could be \u201cpolitically unpopular and tough to sell.\u201d<\/p>\n Article continues below this ad<\/p>\n Some commissioners are looking for savings within the county\u2019s existing operations.<\/p>\n Moody pointed to Plan Your Vote, a third-party website that provides voting information, as one service he believes could be handled by the county’s elections department. Funding for Plan Your Vote is included in a $130,000 line item in next year’s budget.<\/p>\n Tax rate tradeoff<\/p>\n